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Thread: How to live off non final salary pension income?

  1. #51
    Quote Originally Posted by qaz4169 View Post
    I think you need to assess market volatility in determining your average growth rate and fund management costs. 3-4% net growth on a risk rating of 4 is probably reasonable. This means with a reasonable drawdown and a full state pension a £1.25mn pot at 55 years old would mean you run out in your early 90Ēs.


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    What is a reasonable drawdown? And what does a risk rating of 4 mean - is it a 1-10 scale?

  2. #52
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    Quote Originally Posted by Yorkshiremadmick View Post
    Absolutely this was my thought process on getting off the tread mill and away from the rat race.
    Silly as it when my state pension kicks in at 66 (2years time, hopefully) it stands to give me £125/wk
    Thatís a huge lift and will be a great help.
    I know Iíve a few watches I can sell if times are desperate.




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    How do you know what pension you will get at 66?

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  3. #53
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    Quote Originally Posted by rdesouza View Post
    How do you know what pension you will get at 66?

    There is a website that gives you the figure. It also shows up your shortfall in contributions (if any)

  4. #54
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    Thanks will search

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  5. #55
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    Quote Originally Posted by rdesouza View Post
    How do you know what pension you will get at 66?

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    There's a Gov. website where you can input details like your NI number etc and it'll give you a personal estimate.

  6. #56
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    sorry to highjack the thread, I've never had to worry about a IFA before as i always felt i had a pretty good handle on my finances, but feel like i'm reaching a point where I'm beyond my limited knowledge.

    I'm currently 48, been in final salary pensions since my early 20's, changed companies in my early 30's and joined another final salary pension scheme then. This employer is currently re-inventing itself (there is a few of us on here) and are closing the final salary scheme in july and transferring all of us onto the DC scheme and giving us a 30% salary uplift for 2 years, which then drops to 20% there after, i've just broke both the lifetime allowance and the annual allowance with my current pension plan alone.

    I was intending on just paying all the 30% into the DC plan, now I'm not so sure, I've ignored first FS pension for the last 16 years but I'm pretty sure it is inflating quite nicely - should I pay a IFA or just keep investing for now?

    first world problems i know

  7. #57
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    Quote Originally Posted by Chewitt13 View Post
    sorry to highjack the thread, I've never had to worry about a IFA before as i always felt i had a pretty good handle on my finances, but feel like i'm reaching a point where I'm beyond my limited knowledge.

    I'm currently 48, been in final salary pensions since my early 20's, changed companies in my early 30's and joined another final salary pension scheme then. This employer is currently re-inventing itself (there is a few of us on here) and are closing the final salary scheme in july and transferring all of us onto the DC scheme and giving us a 30% salary uplift for 2 years, which then drops to 20% there after, i've just broke both the lifetime allowance and the annual allowance with my current pension plan alone.

    I was intending on just paying all the 30% into the DC plan, now I'm not so sure, I've ignored first FS pension for the last 16 years but I'm pretty sure it is inflating quite nicely - should I pay a IFA or just keep investing for now?

    first world problems i know
    Wowzers. Retire tomorrow, buy a yacht and sail off into the sunset?

    All joking aside in your position I would ask around, find a trusted IFA and use them. Your situation is pretty complicated (obviously in a very good way) and sound advice now could save an enormous amount in the future I suspect.

    Obviously it wonít be cheap... but it doesnít look like youíre short of a few quid!

  8. #58
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    Quote Originally Posted by Peck View Post
    Wowzers. Retire tomorrow, buy a yacht and sail off into the sunset?

    All joking aside in your position I would ask around, find a trusted IFA and use them. Your situation is pretty complicated (obviously in a very good way) and sound advice now could save an enormous amount in the future I suspect.

    Obviously it wonít be cheap... but it doesnít look like youíre short of a few quid!
    It sounds much grander than it actually feels!!! It's all just paper money, I can't really spend it, also the LA and AA has come down to meet me not that I have huge savings compared to some

    I also had children slightly later so accept that my retirement goal of 55 will be 60 based on the fact my kids will still be draining me then!!!

    I have no idea of SIPPs etc my moto has always been to keep paying the maximum amount I could, and it will look after itself reading through all the retirement thread It looks much more complicated than I thought it would be.

    I accept that I will need a IFA when I prepare to retire, but should I get one now, or do I just go with the flow for a few years until I get closer to retirement.

    I know that IFA would not touch me whilst I was under 50 and in a active FS scheme





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  9. #59
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    I appreciate everything is relative, both to your current spending and your financial needs in retirement, but if you've had a job that has been 'hugely' financially rewarding then chances are you can contemplate early retirement; the question is whether the compromise of time gained v financial loss is worth it.

    The OP's point of adjusting to decumulation is a good one, especially when you've a mind set of saving for the future and the future's arrived/getting shorter! I'm 56 and won't be working full time past 60 simply because I've recognised life is too short given I can enjoy my job but would choose to do other things. I'm aiming for a position of keeping busy with a mixture of hobbies, free time, volunteering and a small property project, the latter being something that I'm thinking might help negate the decumulation in the short term so that I ease into retirement. I suspect once I'm used to it I'll be fine as I'll have done my sums and spending what I'm happy with.

  10. #60
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    Quote Originally Posted by Chewitt13 View Post
    It sounds much grander than it actually feels!!! It's all just paper money, I can't really spend it, also the LA and AA has come down to meet me not that I have huge savings compared to some

    I also had children slightly later so accept that my retirement goal of 55 will be 60 based on the fact my kids will still be draining me then!!!

    I have no idea of SIPPs etc my moto has always been to keep paying the maximum amount I could, and it will look after itself reading through all the retirement thread It looks much more complicated than I thought it would be.

    I accept that I will need a IFA when I prepare to retire, but should I get one now, or do I just go with the flow for a few years until I get closer to retirement.

    I know that IFA would not touch me whilst I was under 50 and in a active FS scheme





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    I was just joking; youíre in an amazing position from a pension POV for sure.

    I presume given your company is transitioning you out of the FS scheme they will provide you all with a route to receive independent advice? Surely thatís a must especially as youíre already over the lifetime limit etc?

    There are a few IFAs on here who may chime in hopefully!

  11. #61
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    Quote Originally Posted by David_D View Post
    Basically correct (payments may be indexed too - CPI or RPI). There will almost certainly be a widow/widower's pension and provision for children up to a certain age/full time education but no pot that reverts to your estate, etc..



    Also some IHT benefits for pension savings.
    It depends on the scheme I have 2 final salary schemes one offers 3x pension as a lump sum on retirement which can be increased by surrendering monthly pension amount. The other has no lump sum but you can exchange monthly pension for one

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  12. #62
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    Quote Originally Posted by Kingstepper View Post
    And what does a risk rating of 4 mean - is it a 1-10 scale?
    Most pension providers rate risk on a scale of 1-7. So 4 is considered to be middle of the road, 5-7 are for the more adventurous with increasing exposure to equities and emerging markets, whilst 1-3 are low risk (corporate bonds, gilts, etc)

    Most pension providers have an online portal now which provides a fair amount of detail. Many also allow you to self-allocate units across a cross section of different funds. So for instance with Aviva, you can view the risk rating they ascribe to each fund and view a detailed fact sheet setting out what that fund is currently invested in, past performance and fees. There is a fair amount of common sense involved, so you can increase weighting to low risk funds when feeling nervous about the market and then re-allocate into higher risk areas when prospects feel stronger.

    One thing I would highlight is to always check benchmark performance. It's really easy to get hung up on the fund management fee; the performance of different funds with the same risk rating and target sector allocations can be wildly different. That's down to the skill of the fund manager in stock selection, performance benchmarking is given in sector quartiles. A "lazy" investor will have money tied up in a fund which is consistently a bottom quartile performer (but they won't have checked that to know), when there are funds that are consistently top quartile performers over the short, medium and long term. A fee of say 0.5% is not much of a consideration when the difference between upper and lower quartile performance is many multiples of that.

  13. #63
    Grand Master snowman's Avatar
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    My Dad retired at 60 on a decent (possibly excellent, my Mum still gets a decent sum each month) final salary pension.

    Next year I'll reach the same age and I don't see any way I could retire and maintain the lifestyle (modest though it is, compared to many on here) I have on my pension.

    The problem I see is that you can probably live (assuming you're essentially debt free) on relatively little, but if you want to have nice holidays, buy things, go places, etc then you need more and being retired, surely you need MORE money than when working because you have so much more time to fill!

    I expect to keep working for another 10 years or so, if I can, although for the last couple of years I've worked kind of part-time anyway.

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  14. #64
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    What I found fascinating with the calculator linked to earlier is the difference that £10k a year makes in terms of drawdown.
    I put in a few figures just to see and with one I would still have a decent chunk left after 40 years and with £10k more I would run out in 33 years.

    Obviously by that point I probably wouldnít care either way but just interesting how the maths works.

  15. #65
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    Quote Originally Posted by Yorkshiremadmick View Post
    Mine is index linked, rises by the previous years inflation ?
    Capped at 5%
    Likewise paying out on death plus 1/2 pension for Mrs.


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    I'm in a similar position - my wife and I retired at 50 with final salary pensions on the same deal.

    We were concerned about the reduction in income initially but we believe, as others have said, that as you get older one starts to appreciate that 'experiences' are more important than 'possessions'. I know many worry about the loss of money but we found that it is quiet easy to cut your cloth a little and still have a great, but uncomplicated life.

    The biggest benefit was the freedom that we enjoy to do pretty much what 'we' like. We did do our 'sums' beforehand to be sure and once the figures worked for us and our situation we made the decision not to work. The hardest bit was actually doing it and leaving work but once done we absolutely no regrets.

    Let us know what you decide!

  16. #66
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    The OP mentions that he has rental properties. One of the advantages of them (though not many these days, I grant you) is that rents tend to keep up with inflation and rarely if ever go down. I retired at 55, twelve years ago now, and am in the fortunate position to have invested monies in equities when I sold my share of the company, but had already built a portfolio of rentals which I've now had for 20years+

    Looking back over the years, rents have kept up despite very low tenant churn, so in my view has proved over time to be a good, reliable source of income, and the capital growth and value is always there.

    Would I do it now? Probably not.

  17. #67
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    Not strictly on topic but found this on MSE
    As a rule of thumb, Martin explained: "To get roughly two thirds of your final salary each year in retirement, you'd need to take the age you start contributing to your pension, halve it, and put that percentage every year

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  18. #68
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    Money is all well and good, of course!

    One thing you cant buy, no matter how rich you are................ is time!

    You will therefore, be hardly surprised, when I recommend anybody, to retire as soon as they can!.
    Last edited by valleywatch; 24th February 2021 at 17:49. Reason: spelling!

  19. #69
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    Thereīs no benefit to being the richest man in the graveyard. Though I concede the ancient Egyptians thought differently.

  20. #70
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    Quote Originally Posted by Passenger View Post
    Thereīs no benefit to being the richest man in the graveyard. Though I concede the ancient Egyptians thought differently.
    Yup. I've never seen I wish I spent more time at the office on anyone's headstone

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  21. #71
    Quote Originally Posted by rdesouza View Post
    How do you know what pension you will get at 66?

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    Hi

    Try: https://www.gov.uk/check-state-pension

    Best Neil

  22. #72
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    if anyone is playing with the numbers, this is the best online retirement calculator I've found on the net. It talks about dollars but ignore that and think of everything in pounds. Numerous input variables across the tabs so that you can look at things like different spending models, portfolio mix, lump sums, and state pension when it kicks in (assuming full qualifying years, £9,135/annum each). It shows how your money would have lasted had you retired in each year since the late 1800s (by using U.S. stock market performance, though UK wouldn't be massively different). I've found it a useful indicator.
    https://www.firecalc.com/

  23. #73
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    Quote Originally Posted by valleywatch View Post
    Money is all well and good, of course!

    One thing you cant buy, no matter how rich you........... are is time!

    You will therefore, be hardly surprised, when I recommend anybody, to retire as soon as they can!.

    +1, thatís my advice too, although it pays to be sure youíll have enough income to support the lifestyle you expect to lead in retirement. It helps if you have relatively modest tastes, but many people find their values change after retirement and having a new car on the driveway etc doesnít seem important anymore.

    Early retirement could be classed as a luxury in itself, thatís the way it felt to me. As Daneyís comment alludes to, you canít buy time.

  24. #74
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    I took the early retirement route. I was called crazy. Youíll fail, you wonít manage. We did our sums. We cut our cloth and our expectations. That was back in 2013. I saw men and women
    Striving to hit the maximum 40 years for their final salary pensions all saying you must be mad to go with 15/60ths you have got to have at least 30.
    So many of those poor souls died. A lot died within the first 6months of retirement.
    I choose life.


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  25. #75
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    Quote Originally Posted by Taxboy View Post
    Yup. I've never seen I wish I spent more time at the office on anyone's headstone
    Well, I wish I'd spent less of the last year stuck at home - Not having any work to do would have driven me mental and I've never been a 'live to work' type

    Still, I suppose retirees got a cheap year of living along with the rest of us.

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  26. #76
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    Quote Originally Posted by chrisjones3 View Post
    Pension question again. I am thinking of early retirement coming up 55.

    No final salary pension but I do have a decent pension fund (defined contribution) plus savings and some rental property. Mathematically I think i can do it.

    However psychologically I am concerned with the transition. Specifically I have been a bit of a saver and not very profligate over the years (watches notwithstanding). However I fear that with no regular income, just savings or drawdown from finite funds, then I might go into financial paranoia mode and try to save for a rainy day for fear of depleting the finite capital pool I have? And end up in self imposed penury.

    If it was a final salary pension then the certainty of the income stream would be comforting. Even if the wealth perspective is little different

    Has anyone faced the same problem and how do you manage a regular income to feel like a reliable pension income that should be enjoyed, without just feeling like you are spending hard fought savings that should be minimized and restricted to the least possible burn rate?

    Probably not a question many folks have experience of but there are a few pension threads here?


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    Well done for asking the question of yourself ... many just grind away until the standard retirement age then drop dead ...


    It's impossible to advise without knowing the specifics but for me it was ultimately trade off between:

    - Time
    - Lifestyle / Money
    - Ego / self worth

    You can never buy more time and the value of time diminishes with health ... we can't know what the future holds but typically health deteriorates and the ability to do fun things reduces as you get older ... although there are many active old people.

    Lifestyle is a personal matter and you need to understand how much money you will need to sustain your desired lifestyle. I do plenty of excel analysis of our finances to keep a track of where we are and how the investments are panning out ...

    Ego / Self worth ... if you are holding down an "important" heavyweight corporate role that can be quite defining and when you leave and perhaps retire or become self-employed you don't carry that status anymore and so you lose a part of who you are and this can be hard for some. I used to hold a multi million pound marketing budget and when I walked into London agencies the red carpet came out and people fawned over me only because they wanted my budget ... when I chucked it all in I started up self employed and remember turning up in web designers grubby smoke filled office to discuss a project ... clearly they had forgotten I was coming and I stood in the door whilst they argued in front of me about who was going to deal with me ... I vividly recall standing there thinking what has happened to me ... so when you quit you lose all the status and does that matter ... not to me as I valued the time more.

    I pretty much retired at 45 but have been self employed since ... to start with I made some decent money but that has gradually declined to almost nothing over the last 10 years.

    I stopped working because my dad got cancer and then died at a young age (64) and that made me rethink my choices and I just wanted time to spend with my family and friends and to do my hobbies. I took a massive salary cut.

    We don't have kids and have no debt or mortgage; we have some investment property and some ISAs/SIPP ... we are not rich but we are living a relatively modest life ... we like travel and have a VW camper and have used that a lot (pre-Covid).

    My intention is to keep capital appreciating and our target drawdown is 3% which I think is quite modest.

    When I quit everyone thought I was mad ... but its just a job and had it not worked out I could have easily gone back. Some people spend what the earn and end up locked in ... it's all about what you want out of life. I have friends who love work, never seem to have any time for their family and are always away working, they are happy, it is their choice but it's not for me but we are all different.

  27. #77
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    Quote Originally Posted by Montello View Post
    Well done for asking the question of yourself ... many just grind away until the standard retirement age then drop dead ...


    It's impossible to advise without knowing the specifics but for me it was ultimately trade off between:

    - Time
    - Lifestyle / Money
    - Ego / self worth

    You can never buy more time and the value of time diminishes with health ... we can't know what the future holds but typically health deteriorates and the ability to do fun things reduces as you get older ... although there are many active old people.

    Lifestyle is a personal matter and you need to understand how much money you will need to sustain your desired lifestyle. I do plenty of excel analysis of our finances to keep a track of where we are and how the investments are panning out ...

    Ego / Self worth ... if you are holding down an "important" heavyweight corporate role that can be quite defining and when you leave and perhaps retire or become self-employed you don't carry that status anymore and so you lose a part of who you are and this can be hard for some. I used to hold a multi million pound marketing budget and when I walked into London agencies the red carpet came out and people fawned over me only because they wanted my budget ... when I chucked it all in I started up self employed and remember turning up in web designers grubby smoke filled office to discuss a project ... clearly they had forgotten I was coming and I stood in the door whilst they argued in front of me about who was going to deal with me ... I vividly recall standing there thinking what has happened to me ... so when you quit you lose all the status and does that matter ... not to me as I valued the time more.

    I pretty much retired at 45 but have been self employed since ... to start with I made some decent money but that has gradually declined to almost nothing over the last 10 years.

    I stopped working because my dad got cancer and then died at a young age (64) and that made me rethink my choices and I just wanted time to spend with my family and friends and to do my hobbies. I took a massive salary cut.

    We don't have kids and have no debt or mortgage; we have some investment property and some ISAs/SIPP ... we are not rich but we are living a relatively modest life ... we like travel and have a VW camper and have used that a lot (pre-Covid).

    My intention is to keep capital appreciating and our target drawdown is 3% which I think is quite modest.

    When I quit everyone thought I was mad ... but its just a job and had it not worked out I could have easily gone back. Some people spend what the earn and end up locked in ... it's all about what you want out of life. I have friends who love work, never seem to have any time for their family and are always away working, they are happy, it is their choice but it's not for me but we are all different.
    Nice summary and analysis!!

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  28. #78
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    Quote Originally Posted by Montello View Post
    Well done for asking the question of yourself ... many just grind away until the standard retirement age then drop dead ...


    It's impossible to advise without knowing the specifics but for me it was ultimately trade off between:

    - Time
    - Lifestyle / Money
    - Ego / self worth

    You can never buy more time and the value of time diminishes with health ... we can't know what the future holds but typically health deteriorates and the ability to do fun things reduces as you get older ... although there are many active old people.

    Lifestyle is a personal matter and you need to understand how much money you will need to sustain your desired lifestyle. I do plenty of excel analysis of our finances to keep a track of where we are and how the investments are panning out ...

    Ego / Self worth ... if you are holding down an "important" heavyweight corporate role that can be quite defining and when you leave and perhaps retire or become self-employed you don't carry that status anymore and so you lose a part of who you are and this can be hard for some. I used to hold a multi million pound marketing budget and when I walked into London agencies the red carpet came out and people fawned over me only because they wanted my budget ... when I chucked it all in I started up self employed and remember turning up in web designers grubby smoke filled office to discuss a project ... clearly they had forgotten I was coming and I stood in the door whilst they argued in front of me about who was going to deal with me ... I vividly recall standing there thinking what has happened to me ... so when you quit you lose all the status and does that matter ... not to me as I valued the time more.

    I pretty much retired at 45 but have been self employed since ... to start with I made some decent money but that has gradually declined to almost nothing over the last 10 years.

    I stopped working because my dad got cancer and then died at a young age (64) and that made me rethink my choices and I just wanted time to spend with my family and friends and to do my hobbies. I took a massive salary cut.

    We don't have kids and have no debt or mortgage; we have some investment property and some ISAs/SIPP ... we are not rich but we are living a relatively modest life ... we like travel and have a VW camper and have used that a lot (pre-Covid).

    My intention is to keep capital appreciating and our target drawdown is 3% which I think is quite modest.

    When I quit everyone thought I was mad ... but its just a job and had it not worked out I could have easily gone back. Some people spend what the earn and end up locked in ... it's all about what you want out of life. I have friends who love work, never seem to have any time for their family and are always away working, they are happy, it is their choice but it's not for me but we are all different.
    Folks. Thanks for all the advice. Really interesting thoughtful and thought provoking comments

    I think the points made early on about getting the spreadsheet out and confidently working up the number is critical. A few have described a little bit of market watching for sustainability in the early years but that settles after a while into a routine. Good to know!!

    I also saw too what bambam notes that there is a very fine line between a live for ever money supply, and a finite runs out by 90 or so timeframe. The former might be possible and will clearly lead to a more relaxing lifestyle.

    But the comment quoted above from Montello sums up the position

    Really it is time vs money. But I guess as he notes- it is the quality of time multiplied by health that counts, versus the quantity of money needed for a lifestyle.. 55-60 is more likely to be healthily useable than 65-70, statistically. Frankly I think retiring early would give me a better chance of reaching 65-70 fit and healthy rather than not reaching it (fat and dead)!!!

    Also the ego / social interaction element noted is part of it I am sure. My wife warns me that might be a bigger impact than I think, although she is very tired of the life we lead and is a proponent of retiring. Coming up 30 years with the same company is not so common these days, or indeed so easy to replace.

    Anyway thanks for all the input!! Next few months will see how things shape up covid/work/life wise.


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  29. #79
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    If youíre of a podcast persuasion, check out Meaningful Money. Very informative. The host has loads of content covering retirement, along with general investment stuff. Highly recommended.

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    Quote Originally Posted by chrisjones3 View Post
    Folks. Thanks for all the advice. Really interesting thoughtful and thought provoking comments

    I think the points made early on about getting the spreadsheet out and confidently working up the number is critical. A few have described a little bit of market watching for sustainability in the early years but that settles after a while into a routine. Good to know!!

    I also saw too what bambam notes that there is a very fine line between a live for ever money supply, and a finite runs out by 90 or so timeframe. The former might be possible and will clearly lead to a more relaxing lifestyle.

    But the comment quoted above from Montello sums up the position

    Really it is time vs money. But I guess as he notes- it is the quality of time multiplied by health that counts, versus the quantity of money needed for a lifestyle.. 55-60 is more likely to be healthily useable than 65-70, statistically. Frankly I think retiring early would give me a better chance of reaching 65-70 fit and healthy rather than not reaching it (fat and dead)!!!

    Also the ego / social interaction element noted is part of it I am sure. My wife warns me that might be a bigger impact than I think, although she is very tired of the life we lead and is a proponent of retiring. Coming up 30 years with the same company is not so common these days, or indeed so easy to replace.

    Anyway thanks for all the input!! Next few months will see how things shape up covid/work/life wise.


    Sent from my iPhone using Tapatalk
    Good luck, to be honest the ego thing soon fades. Something to consider is do you have hobbies? If you donít what do you plan to do with your time? Some consulting work part time eases things.


    On the finance side I find the expense % really useful. i.e. what you spend / total assets.

    If that is 4% or less think you have the choice to retire, I try and run at 3% which feels a little safer ...

  31. #81
    Master aldfort's Avatar
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    I imagine this has all been said in the forgoing posts.


    You need a good IFA .
    You need to be realistic about your ongoing outgoings.
    You need to know how you hope to use the free time,
    You need to think about what will happen when you are older.
    Most sources of advice say you need at least £0.5 m to make it work.
    Depending on your risk appetite you'll be reliant on drawdown.
    Annuities are in the toilet due to QE.
    Think about partial retirement for a decade to fill in the gap to state pension age.

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